1 This publication contains preliminary estimates of building and engineering construction work done during the current quarter and revised estimates for the previous two quarters. The estimates of building work done and engineering work done are from the quarterly Building Activity Survey and the quarterly Engineering Construction Survey respectively. Estimates of work done are based upon a response from each survey of approximately 80% of the value of work done during the current quarter. More comprehensive and updated results will be available shortly in Building Activity, Australia (cat. no. 8752.0) and Engineering Construction Activity, Australia (cat. no. 8762.0).

SCOPE AND COVERAGE

2 The scope of the Building Activity Survey is building activity which includes construction of new buildings and alterations and additions to existing buildings.

3 As of the June quarter 2006, the survey has consisted of:

an indirect, modelled component comprising residential building work with approval values from $10,000 to less than $50,000 and non-residential building work with approval values from $50,000 to less than $250,000. The contributions from these building jobs are modelled based on their building approval details.

a direct collection of all identified building work having approval values of $2,000,000 or more.

a sample survey, selected from other identified building work.

4 Building jobs included in each quarter in the Building Activity Survey comprise those jobs selected in previous quarters which have not been completed (or commenced) by the end of the previous quarter and those jobs newly selected in the current quarter. The population list from which jobs are selected for inclusion comprises all approved building jobs which were notified to the ABS (refer paragraph 3) up to but not including the last month of the reference quarter (i.e. up to the end of August in respect of the September quarter survey). This introduces a lag to the statistics in respect of those jobs notified and commenced in the last month of the reference quarter (i.e. for the month of September in respect of the September quarter survey). For example, jobs which were notified as approved in the month of June and which actually commenced in that month are shown as commencements in the September quarter. Similarly, building jobs which were notified in the month of September and which actually commenced in that month are shown as commencements in the December quarter.

5 The scope of the Engineering Construction Survey is the value of all engineering construction work undertaken in Australia. Where projects include elements of both building and engineering construction every effort is taken to exclude the building component from the engineering construction statistics.

STATISTICAL UNIT

6 In the Engineering Construction Survey, the statistical unit used to represent businesses, and for which statistics are reported, is the Australian Business Number (ABN) unit, in most cases. The ABN unit is the business unit which has registered for an ABN, and thus appears on the Australian Taxation Office (ATO) administered Australian Business Register. This unit is suitable for Australian Bureau of Statistics statistical needs when the business is simple in structure. For more significant and diverse businesses where the ABN unit is not suitable for Australian Bureau of Statistics statistical needs, the statistical unit used is the Type of Activity Unit (TAU). A TAU is comprised of one or more business entities, sub-entities or branches of a business entity within an enterprise group that can report production and employment data for similar economic activities. When a minimum set of data items is available, a TAU is created which covers all the operations within an industry subdivision - and the TAU is classified to the relevant subdivision of the Australian and New Zealand Standard Industrial Classification(ANZSIC). Where a business cannot supply adequate data for each industry, a TAU is formed which contains activity in more than one industry subdivision and the TAU is classified to the predominant ANZSIC subdivision.

8 Data on the value of work done on the construction of new residential buildings, alterations and additions to residential buildings, private sector non-residential buildings and the value of engineering construction activity are the major sources of data which are used to compile the national accounts estimates for private gross fixed capital formation on dwellings, and other buildings and structures. However, there are some adjustments to the survey data which are made in the process of compiling these national accounts series. Allowances are made for the value of activity which is out of scope of the Building Activity Survey and the Engineering Construction Survey. Such activity includes work done on projects which fall below the size cut-offs used for the Building Activity survey and also the value of building work done which is undertaken without obtaining a building permit, either because such a permit is not required or because the requisite permit is not obtained. The national accounts estimates also make allowances for purchases (less sales) of buildings and other structures from (to) the public sector.

TREATMENT OF THE GST

9 Statistics on the value of work (current prices) show residential building work done on a GST inclusive basis and non-residential work and engineering construction work done on a GST exclusive basis. This approach is consistent with that adopted in the Australian National Accounts which is based on the conceptual framework described in the 1993 edition of the international statistical standard System of National Accounts (SNA93).

10 SNA93 requires value added taxes (VAT), such as the GST, to be recorded on a net basis where:

(a) both outputs of goods and services and imports are valued excluding invoiced VAT
(b) purchases of goods and services are recorded including non-deductible VAT.

11 Under the net system, VAT is recorded as being payable by purchasers, not sellers, and then only by those purchasers who are not able to deduct it. Almost all VAT is therefore recorded in the SNA93 as being paid on final uses - mainly on household consumption. Small amounts of VAT, may however, be paid by businesses in respect of certain kinds of purchases on which VAT may not be deductible.

12 The ABS records value of work done inclusive of GST in respect of residential construction and exclusive of GST in respect of non-residential construction and engineering construction. Purchasers of residential structures are unable to deduct GST from the purchase price. For non-residential structures and engineering construction, the reverse is true in most circumstances.

13 Total construction work is derived by adding total building work and total engineering construction work. To derive total building activity it is appropriate to add the residential and non-residential components. Valuation of the components of the total is consistent, since, for both components, the value of work done is recorded inclusive of non-deductible GST paid by the purchaser. As such, total building activity and total construction includes the non-deductible GST payable on residential building.

14 As estimates for engineering work are provided on a GST exclusive basis, and the majority of construction materials used were exempt from Wholesale Sales Tax, the introduction of the GST had little direct effect on the estimates of engineering construction.

CLASSIFICATION

15 Ownership. The ownership of a building is classified as either private sector or public sector, according to the sector of the intended owner of the completed building as evident at the time of approval. Engineering projects are classified as either private sector or public sector according to the expected ownership of the project at the time of completion.

16 Building jobs are classified both by the Type of Building (e.g. 'residential', 'non-residential') and by the Type of Work involved (e.g. 'new' and 'alterations and additions'). These classifications are used in conjunction with each other and are defined in the Glossary.

RELIABILITY OF THE ESTIMATES

17 The estimates of engineering activity are based on a sample survey as are the estimates of private sector building activity. A complete enumeration of public sector building activity is done. Because data are not collected for all engineering jobs nor for all building jobs, the published estimates are subject to sampling variability. Relative standard errors give a measure of this variability and therefore indicate the degree of confidence that can be attached to the data.

18 Relative standard errors for the value of work done in this quarter are given below. There is 67% confidence that the actual value would be within one standard error of the sample estimate, and 95% confidence that it lies within two standard errors.

Australia

%

New private residential building

1.1

Total private residential building

0.9

Private non-residential building

0.9

Total private building

0.7

Total residential building

0.9

Total non-residential building

0.8

Total building

0.6

Engineering for the private sector

2.4

Total engineering

2.2

States and territories

Total building

Total engineering

%

%

NSW

1.0

2.6

Vic.

1.1

3.8

Qld

1.4

3.4

SA

1.8

11.5

WA

2.3

5.7

Tas.

1.7

9.6

NT

1.4

11.4

ACT

0.6

8.0

SEASONAL ADJUSTMENT

19 In the seasonally adjusted series, account has been taken of normal seasonal factors, ‘trading day’ effects arising from the varying numbers of working days in a quarter and the effect of movement in the date of Easter which may, in successive years, affect figures for different quarters.

20 Since seasonally adjusted statistics reflect both irregular and trend movements, an upward or downward movement in a seasonally adjusted series does not necessarily indicate a change of trend. Particular care should therefore be taken in interpreting individual quarter-to-quarter movements.

21 The seasonally adjusted estimates in this publication are produced by the concurrent seasonal adjustment method which takes account of the latest available original estimates. The concurrent method improves the estimation of seasonal factors and, therefore, the seasonally adjusted and trend estimates of the current and previous quarters.

22 A more detailed review of concurrent seasonal factors will be conducted annually, generally prior to the release of data for the December quarter.

23 The revision properties of the seasonally adjusted and trend estimates have been improved by the use of autoregressive integrated moving average (ARIMA) modelling. ARIMA modelling relies on the characteristics of the series being analysed to project future period data. The ARIMA model is assessed as part of the annual reanalysis. For more information on the details of ARIMA modelling see feature article: Use of ARIMA modelling to reduce revisions in the October 2004 issue of Australian Economic Indicators (cat. no. 1350.0).

TREND ESTIMATES

24 Seasonally adjusted series can be smoothed to reduce the impact of the irregular component in the adjusted series. This smoothed seasonally adjusted series is called a trend estimate.

25 The trend estimates are derived by applying a 7-term Henderson moving average to the seasonally adjusted series. The 7-term Henderson average (like all Henderson averages) is symmetric but, as the end of a time series is approached, asymmetric forms of the average are applied. Unlike weights of the standard 7-term Henderson moving average, the weights employed here have been tailored to suit the particular characteristics of individual series.

26 While the smoothing technique described in paragraphs 23 and 24 enables trend estimates to be produced for recent quarters, it does result in revisions to the estimates for the most recent three quarters as additional observations become available. There may also be revisions because of changes in the original data. For further information, seeInformation Paper: A Guide to Interpreting Time Series - Monitoring Trends, 2003 (cat. no. 1349.0) or contact the Assistant Director, Time Series Analysis on Canberra (02) 6252 6540 or email <timeseries@abs.gov.au>.

CHAIN VOLUME MEASURES

27 Chain volume estimates of the value of work done are presented in original, seasonally adjusted and trend terms.

28 While current price estimates of value of work done reflect both price and volume changes, chain volume estimates measure changes in value after the direct effects of price changes have been eliminated and therefore only reflect volume changes. The direct impact of the GST is a price change, and hence is removed from chain volume estimates. The deflators used to revalue the current price estimates in this publication are derived from the same price data underlying the deflators compiled for the dwellings and new other building components, and the new engineering construction component, of the national accounts aggregate ‘Gross fixed capital formation’.

29 The chain volume measures of work done appearing in this publication are annually reweighted chain Laspeyres indexes referenced to current price values in a chosen reference year. The reference year is updated annually in the September quarter publication. Each year’s data in the value of work done series are based on the prices of the previous year, except for the quarters of the latest incomplete year which are based upon the current reference year. Comparability with previous years is achieved by linking (or chaining) the series together to form a continuous time series. Further information on the nature and concepts of chain volume measures is contained in theABS Information Paper: Australian National Accounts, Introduction of Chain Volume and Price Indexes (cat. no. 5248.0).

30 The factors used to seasonally adjust the chain volume series are identical to those used to adjust the corresponding current price series.

ACKNOWLEDGMENT

31 ABS publications draw extensively on information provided freely by individuals, businesses, governments and other organisations. Their continued cooperation is very much appreciated: without it, the wide range of statistics published by the ABS would not be available. Information received by the ABS is treated in strict confidence as required by the Census and Statistics Act 1905.

RELATED PRODUCTS

32 All tables in this publication, plus some additional state and territory series are available in electronic form on the ABS web site.

34 As well as the statistics included in this and related publications, the ABS may have other relevant data available on request. Inquiries should be made to the National Information and Referral Service on 1300 135 070.